ending new ventures

7/29/2019 ending new ventures

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Ending The Venture


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Bankruptcy Bankruptcy is the inability to discharge all your

debts as they come due

(law) a legal process intended to insure equality among

the creditors of a corporation declared to beinsolvent(Someone who has insufficient assets to cover

their debts)


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Bankruptcys LessonsA. Overextension To Markets

B. Protects From Creditors NotCompetitors

C. Entrepreneur = Business

D. Recognize Failure Too Late

E. Emotionally Painful


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Strategy DuringReorganization

Prepare Plan

Sell Plan

CommunicateNo Checks That Cant Be

Covered


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Reducing Risk Of FailureAvoid Excess Optimism

Prepare Good Marketing Plan

Make Good Cash Projections

Keep Abreast Of Market Identify Business Stress Points


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Bankruptcy Warning Signs

Financial Management

Lax

Inability To

Document/Explain

Transactions

Large Discounts To

Speed Up Cash FlowContracts Below

Standard Amounts

Bank Wants

Subordination

Key Personnel Leave

Lack Of Materials

Unpaid Taxes

Demand For Cash

PaymentCustomer Complaints

Increase


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Failure Reality

Consult with

Family/Friends

Seek Outside Assistance

Drop Venture That Is

Draining Resources


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Harvesting the Venture:

A Focus on the Future

Harvest Plan

Defines how and when the owners and investors will

realize an actual cash return on their investment.

Reasons for Harvesting To maintain managerial control and succession for

successful continued operations.

To initiate a liquidity event that will generate a

significant amount of cash for the investors.An IPO (initial public offering) has become a reality.

Most realistic opportunity is sale of the business.


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HarvestingDirect Sale

Employee Stock Option

2-3 Year Plan to Sell To EmployeesCreate Trust Fund

Management Buy-Out- Based

On Value Of Goodwill & AssetAppraisal


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Direct Sale Requires Time & Planning

Buyer Payment Method

Business Broker

Business Plan

Employment Contract

Covenant Not To Compete


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Advantages and Disadvantages of Family Controlled

Firms

Advantages Long-term orientation

Greater independence

of action

Family culture as asource of pride

Greater resilience in

hard times

Less bureaucratic and

impersonal

Financial benefits

Knowing the business

Disadvantages Less access to capital

markets may curtail

growth

Confusing organization Nepotism

Spoiled-kid syndrome

Paternalistic/autocratic

rule

Financial strain

Succession dramas


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The Management Succession

Strategy

Management Succession Is the transition of managerial decision making

Is one of the greatest challenges confrontingowners and entrepreneurs in privately held

businesses.

Research on private firms shows:

Many go out of existence after 10 years; only 3 outof 10 survive into a second generation.

Only 16% make it to a third generation.

Their average life expectancy is 24 years, which isalso the average tenure for founders of a business.


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Succession Planning Issues

Senior Management Committed To

Plan

Well-Defined Job Descriptions

Open Process


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Succession Planning

Transfer To Family Member Role Of Owner- Full-Time/Part-Time/Retire Members Able To Work Together? Income

Transition Business Environment Loyal Employees Tax Consequences

Transfer To Non-Family Train Key Employee- Retain Some Equity Retain Control- Hire Manager Sell

Documents

ending new ventures